Power overuse and unfair work order to be reflected on an enterprise financial evaluation

[ Kim Min Soo minsu@ ] | 2018-05-15 10:37:37
The Financial Supervisory Service will reflect a new appraisal of social deviations such as financial crisis, appraisal, and financial accounting from this year. Companies such as Korean Air, which has recently become a controversial issue, will be given a more stringent requirement as a deduction in financial evaluation.

The Financial Supervisory Service and the Federation of Korean Industries have revealed that they will reorganize their financial structure evaluation system this year.

The Financial Supervisory Service has selected the affiliated companies with a certain amount or more of the credit amount of financial institutions annually in accordance with the supervision regulation of the banking industry. Companies that are selected as the main debt group should evaluate the financial structure from the main creditor banks and implement the self-financing plan to improve the financial structure if the evaluation results are insufficient.

31 affiliated companies including Samsung, Hyundai, SK, LG and Lotte, which have more than KRW 1.5 trillion in credit amount at the end of last year as a result of the selection of the FSS. These 31 business groups are subject to the improved financial structure assessment system.

Meanwhile, the FSS has set up a cut-line according to the total debt-to-equity ratio of the series, and selected a series that does not meet the cut-off point as a financial structure improvement contract.

However, when calculating the debt-to-equity ratio in the future, affiliates fail to repay their borrowings due to sluggish earnings and credit risk may shift to domestic affiliates. Currently, there are 3,336 overseas subsidiaries out of the 4565 companies belonging to the 31 family companies. The number of affiliates increased due to the expansion of overseas business such as Samsung (150), Hanhwa (93), SK (70), POSCO (58) and CJ (42).

Especially, the Financial Supervisory Service intends to strengthen its qualitative assessment of reputational risk, such as when it engages in misconduct such as embezzlement or misappropriation, moral misconduct, or social injustice. Existing qualitative evaluation has 2 points depending on importance, but there is no future point and it can be deducted up to -4 points. The Hanjin Group, which has been controversial over the recent floods, seems to be the target. The Financial Supervisory Service has revised its "Financial Structure Improvement Operation Principles" after the approval of the board of directors of the Federation of Korean Banks this month and plans to apply it from this year`s financial structure evaluation.

An expert from the Financial Supervisory Service said, "Risk factors of overseas business are increasing due to the recent expansion of large group companies `overseas business. There is a concern that some executives and in order to better reflect the impact of business risk and reputation risk on our financial structure, we plan to finalize the amendment in May and apply it from the financial structure evaluation this year."

By Kim Min Soo minsu@

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